Volume11Media CEO Shares Secret To Monetizing Free Users

People get nutty for virtual goods. They will solve massive puzzles, play for hours on end, come back day after day, and in many cases even pull out their credit cards. The social gaming space is now estimated at over $1B annually. There are tens to hundreds of millions of people out there who have lots of disposable income and are willing to give it to you in exchange for a sword, a fish, a barn, or any other combination of pixels on a screen.

Here’s the problem. Even tens of millions of people still make up a very small fraction of the total Internet population. The games that have done very well in this space have done so at the behest (or expense) of a very small number of extremely dedicated users who often spend hundreds to thousands of dollars on a single game. Gaming companies literally have to cap their allowed daily spend so some users don’t bankrupt themselves. Often as little as 2% of a game’s user base is providing 90% or more of its total revenue, either through direct purchase or some sort of affiliate offer like Netflix or DirecTV.

This doesn’t sound like a big issue at face value, but consider the team you need to maintain such a top-weighted system. You need a huge creative and design team to build a constant supply of new and exciting virtual goods to keep the 2% happy, an engineering support team to maintain the massive marketplace, and a team of PhD economists to balance your constantly-inflating virtual economy (no, really). To exacerbate the problem, most of these games have enormous user turnover rates, so they constantly have to shell out massive ad buys to keep the incoming users flowing. It’s exhausting and extremely expensive.

What if there were a way to hit the other 98% of the users that aren’t willing to spend anything? These users don’t want to pay by cash, they don’t want to sign up for a Discover Card, they already have Netflix (or they did before the price increase), and they don’t want to supply their contact information to a lead-gen or survey company. They just want to play the game.

Enter in-game branded engagement. Advertisers are increasingly interested in being in some type of social environment. And they should be – social users are one of the most engaged groups around, and they are readily willing to share content that they find funny, interesting, or just plain entertaining. In addition, a successful social ad campaign can cost the advertisers a small fraction of what they would pay for a TV or print spot. The Internet is naturally viral, and people will spread good content even if it’s an ad. See the SmartWater campaign with Jennifer Aniston or the Mr. W campaign from an Australian company called Epuron for evidence of this. Both are great ad campaigns and extremely viral.

What does this mean for gaming? We know that users are interested in earning virtual currency. Advertisers are discovering that they can engage these users with entertaining in-game branded content, throw a few shells or gems or coins the user’s way for good measure, and those users will readily consume the content and even ‘Like’ the brand on Facebook and share with their friends…for free. Ads disguised as viral video, advertiser-sponsored mini-games, virtual good sponsorship and branding… users will happily consume and spread (as long as the content is good and non-invasive). It’s like having a small fire that will spread naturally by itself, and then adding a bucket of gasoline to it.

The users that are willing to engage with in-game branded content are part of that other 98% of elusive non-payers. This means publishers are able to earn more money from the same set of users they already have. Also, branded engagements are far less invasive and time consuming than offer walls, lead-gen offers, surveys, credit card forms, and any other form of cost-per-action type of transaction. Users engage, share if they want, and go back to their game.

It really is a win-win-win.

This trend has literally taken 3 years to come around. Facebook is the dominant force in social networking. Social games and MMOs are played by 65% of gamers and advertisers are now spending hundreds of millions on in-game branded engagements. Publishers should be looking to develop their games in a way that will capitalize on this trend. The top 2% will be there, and they should be treated like the billionaire whale on the Baccarat table. But the other 98% are the slot machines. They will make for a far more steady and predictable source of revenue, which makes it much easier to grow the platform. Find ways to monetize that group, and you’re on your way to a successful game. In-game engagement is a proven way to do that.

Andrew Hunter is the CEO of Volume11 Media, and a veteran of the gaming and advertising industries. Volume11 Media is the maker of the AMPlify platform, which brings targeted video advertiser dollars directly to your game without altering your carefully-crafted user experience. Visit v11media.com to learn more.